The agriculture industry offers investors a variety of investment opportunities. From companies that produce and supply agricultural products such as grains, livestock, sugar, soybeans and more, to companies that manufacture fertilizers, packaged foods or agricultural machinery. In this article, we present a small selection of agricultural stocks from different sectors.
OVERVIEW OF THE AGRICULTURAL SECTOR
The agricultural industry is a complex and multi-layered industry that encompasses several sectors, from food production to agricultural technology and organic farming. As a global industry, the sector is dominated by multinational companies, but also offers room for up-and-coming companies and innovations.
Large multinational companies
Large multinationals such as Monsanto (now part of Bayer), Cargill, or Archer Daniels Midland play a central role in the global agricultural industry and are active in various areas, including seed production, agrochemicals, food processing and agricultural technology. The shares of these leading companies are often regarded as defensive quality stocks with a stable performance and rising dividends typical of large, established companies.
Up-and-coming companies and innovations in the industry
In addition to the big players, there are also a number of up-and-coming newcomers that are using new and innovative technologies and methods in the agricultural sector. Examples include companies such as AeroFarms, a pioneer in vertical farming, and Beyond Meat, which is developing plant-based alternatives to meat products. In addition to the globally dominant companies, investors therefore have the opportunity to invest in disruptive technologies that have the potential to fundamentally change the way we produce and consume food.
SUB-SECTORS WITHIN THE AGRICULTURAL INDUSTRY
The agricultural sector is divided into several sub-sectors, each of which has its own specific challenges and opportunities.
Agricultural technology
The agricultural technology sector comprises companies that develop and manufacture machines, equipment and technologies that support farmers in food production. This includes tractors, harvesters, irrigation systems, but also more advanced technologies such as drones for precision farming and robotic technology for automated harvesting. Shares in companies such as Deere & Company or AGCO are possible candidates that could be of interest to investors in this area.
Food production
On the one hand, the food production sector includes companies that grow food and raw materials such as grain, fruit and vegetables. On the other hand, there are companies that process raw materials and convert them into ready-to-consume products. Large multinationals such as Nestlé and Unilever dominate this sector, but also offer opportunities for smaller, specialized companies. Investors can benefit from the stable earnings and dividend continuity that these companies typically offer.
Organic and sustainable agriculture
With increasing concerns about climate change and the impact of conventional farming practices on the environment, organic farming and sustainable agricultural practices are becoming more important. Companies such as Whole Foods Market, which sells organic produce, and The Hain Celestial Group, which specializes in organic and natural products, are active in this sector. These stocks offer investors the opportunity to invest in a more sustainable future of food production.
SPECIAL FEATURES OF AGRICULTURAL SHARES
Many of the large global agricultural companies are considered to be rather defensive stocks and often show a comparatively stable performance and less dependence on economic fluctuations than stocks in other sectors. The classic food producers are often part of the consumer staple sector, which is also known as a defensive sector. (Fertilizer producers are usually part of the materials sector.) This is because food is a basic human need and demand for it remains largely stable even in weak economic phases.
Despite this defensive nature, agricultural shares are characterized by some specific influencing factors, such as a correlation with commodity prices. If the prices of grain, fruit, vegetables and other agricultural products rise, the income of companies in the agricultural sector can increase. On the other hand, falling commodity prices can depress income, which is often reflected in share prices. In addition, extreme weather events such as droughts or floods can damage harvests and affect the productivity of food-producing agricultural companies.
SELECTION OF WELL-KNOWN AND LARGE AGRICULTURAL SHARES AT A GLANCE
In the table below you will find an overview of some of the best-known and largest companies in the agricultural sector from various countries, followed by a detailed presentation of some agricultural shares.
Top 10 agricultural stocks, sorted by market capitalization
| Company | Symbol | Country | Market capitalization |
| Deere & Company | EN | USA | USD 109.79 billion |
| Corteva Inc | CTVA | USA | 39.78 billion USD |
| Archer-Daniels-Midland Company | AMD | USA | 39.64 billion USD |
| Nutrien Ltd | NTR | Canada | USD 30.44 billion |
| Tyson Foods Inc | TSN | USA | USD 17.77 billion |
| Bunge Limited | BG | USA | USD 13.38 billion |
| CF Industries Holdings Inc | CF | USA | USD 12.81 billion |
| Yara International ASA | YAR | Norway | USD 9.88 billion |
| JBS S.A | JBSS3 | Brazil | USD 7.28 billion |
| KWS SAAT SE & Co. KGaA | KWS | Germany | USD 2.09 billion |
ARCHER DANIELS MIDLAND
- Company: Archer-Daniels-Midland Company
- Symbol (TWS): ADM
- ISIN: US0394831020
- Stock Exchange: New York Stock Exchange
- Country: USA
- Currency: US Dollar
- Market capitalization: USD 39.64 billion
- Turnover (TTM) in USD: 101.98 billion.
We have already introduced you to Archer Daniels Midland in our article "Consumer goods stocks". Archer Daniels - headquartered in Chicago - is one of the world's leading processors of agricultural products. The company is engaged in the procurement, transportation, storage, processing and distribution of agricultural commodities, products and ingredients. To purchase, store and purify agricultural commodities, Archer Daniels utilizes a global transportation network as well as grain elevators and ports around the world. Archer Daniels is also a dividend aristocrat, having increased its dividend for over 40 consecutive years. The combination of rising dividends, a solid dividend yield and a recession-resistant business model makes ADM one of the favorite agricultural stocks of many investors.
Brief analysis & outlook
While the ADM share put in a strong performance in the second half of 2022, rising to just under USD 100, the level of its all-time high from the previous year, this was followed by a downward trend in the first half of the new year 2023. The next important technical support area is located at around USD 70. Last year's rise was driven by higher commodity prices and increased demand. An easing on the commodity and grain markets can therefore serve as an explanation for the current price decline. In terms of valuation, however, the share still has plenty of upside potential and the current low prices could represent a favorable buying opportunity.
DEERE
- Company: Deere & Company
- Symbol (TWS): DE
- ISIN: US2441991054
- Stock Exchange: New York Stock Exchange
- Country: USA
- Currency: US Dollar
- Market capitalization: USD 109.79 billion
- Turnover (TTM) in USD: 55.65 billion
Deere & Co is the world's largest manufacturer of agricultural machinery, known in particular under the John Deere brand. The company operates in two core segments: Agriculture and Turf and Construction and Forestry, with the majority of sales coming from agricultural and turf machinery. With a growing global population and due to the increasing demand for food, Deere's business is also expected to benefit from this trend in the coming years. The company pays a solid dividend, which has increased every year since 2003.
Brief analysis & outlook
Deere's financial strength is solid despite record debt levels, as its debt-to-equity ratio is at a 10-year low. In addition, Deere has doubled its dividend over the past five years while reducing its outstanding share count by 8.4%. The company plans to increase selling, general and administrative expenses by 16% and research and development expenses by 14% in fiscal 2023. The research and development budget is expected to exceed $2 billion for the first time, indicating Deere's commitment to developing artificial intelligence (AI) and autonomous tractors to improve efficiency and reduce costs for its customers. Despite Deere's impressive performance, the stock is not cheap. The price-to-cash flow and price-to-book ratios are above their 10-year means and the price-to-earnings ratio is close to the 10-year median.
BUNGE
- Company: Bunge Limited
- Symbol (TWS): BG
- ISIN: BMG169621056
- Stock Exchange: New York Stock Exchange
- Country: USA
- Currency: US Dollar
- Market capitalization: USD 13.38 billion
- Turnover (TTM) in USD: 66.68 billion
Bunge is a global agri-food company whose core business is the supply and transportation of agricultural commodities. Bunge operates in the following segments: Agribusiness (agri-food), Edible Oil Products, Milling Products, Sugar and Bioenergy, and Fertilizers.
The Agribusiness segment comprises the storage and transportation of agricultural raw materials. The Edible Oil Products segment comprises the production and sale of vegetable oils, fats, margarines and mayonnaise. The Milling Products segment produces wheat flour, baking mixes, corn products and rice. Finally, the Sugar and Bioenergy segment produces sugar and ethanol, while the Fertilizer segment produces and sells fertilizers.
Emerging markets are an increasingly important area for Bunge. The company formed a 50:50 joint venture worth 775 million US dollars with BP's sugar and bioenergy assets in Brazil to enable future growth in South America. The future expansion should help the company to increase its profit growth.
Brief analysis & outlook
The Bunge share has been treading water for several months now. However, Wall Street analysts still see considerable upside potential for the share, as the average price target is almost USD 40 above the current price level. Analysts' price targets should not be used as the (sole) criterion for an investment decision and can often be off the mark. However, as the company has solid fundamental data and a rather moderate valuation, there is certainly further upside potential. If the chart-based sideways trend is broken upwards, the chances of a new upward trend are good.
KWS SAAT
- Company: KWS SAAT SE & Co. KGaA
- Symbol (TWS): KWS
- ISIN: DE0007074007
- Stock exchange: XETRA
- Country: Germany
- Currency: EUR
- Market capitalization: EUR 1.93 billion / USD 2.09 billion
- Turnover (TTM) in USD: 1.67 billion
KWS Saat is one of the world's leading seed producers. Based in Einbeck, Germany, the company has specialized in breeding plants for agriculture, including corn, sugar beet, cereals, rapeseed, sunflowers and vegetables, since it was founded in 1856. KWS places particular emphasis on creating varieties with improved yield performance and adaptability to different environmental conditions.
Brief analysis & outlook
As far as the long-term chart of KWS Saat's shares is concerned, the trend is sideways. At around EUR 60, the share price is at the level of the old highs from 2015 and 2016 and around a quarter below its all-time high.
However, the seed producer's business is doing well. Analysts at Jefferies and DZ Bank have raised their price target for KWS Saat's shares to EUR81 and EUR76 respectively after the results for the third quarter and left their rating at "buy". Jefferies analyst Charlie Bentley explained that the company is reaping the rewards of its strategic investments in Latin American sugar beet cultivation, offsetting the challenges in North America. His forecasts for the next two years have been increased by around 10 percent.
The high demand for corn and sugarbeet seed has made KWS Saat more optimistic about the current fiscal year and has led the company to revise its forecasts for the current fiscal year upwards. Net sales growth is now expected to be at the upper end of the previous range of 13 to 15 percent. In addition, a favorable change in the sales mix and potentially lower research and development costs could lead to a higher operating profit than previously assumed.
According to preliminary figures, turnover in the first nine months of the current financial year rose by around a quarter compared to the previous year to around 1.5 billion euros. The operating result rose by almost 41 percent to over 261 million euros. Despite this positive development, the company's success is not yet fully reflected in the share price and investors will probably need a little more patience.
CORTEVA
- Company: Corteva Inc
- Symbol (TWS): CTVA
- ISIN: US22052L1044
- Stock Exchange: New York Stock Exchange
- Country: USA
- Currency: US Dollar
- Market capitalization: USD 39.78 billion
- Turnover (TTM) in USD: 17.74 billion
Corteva is an agricultural company based in the US state of Delaware that emerged from a spin-off from DowDuPont in 2019 and specializes in the development and sale of seeds and crop protection products. Corteva produces seeds for various crops, including cereals, oilseeds and fruits and vegetables. Corteva also develops and produces crop protection products, including herbicides, insecticides, fungicides and seed treatments. The company's commitment to agronomy is focused on helping farmers increase productivity and providing sustainable solutions to feed the world's growing population. Corteva's business consists of 55% in seeds and traits and 45% in crop protection.
Brief analysis & outlook
The Corteva share last reached an all-time high in November 2022 and has been in a sideways to slightly downward consolidation since then. The company's management is currently under internal pressure due to doubts regarding the achievement of profit targets. Despite these short-term difficulties, the long-term prospects for the Corteva share look very promising. The opportunity to improve margins by selling patented products and reducing license fees is seen as having great potential. An important focus is on the Enlist system, a proprietary soybean seed and crop protection system that has resistance to several herbicides and is therefore seen as a competitive advantage.